US Stocks Close Lower; Banks Weigh After JPMorgan View

RobCurran

NEW YORK (MarketWatch) -- U.S. stocks fell Friday and losses mounted after comments from banking executives such as JPMorgan Chase Chief Executive Jamie Dimon dented some hopes that the worst was behind that sector.

Still, the Dow Jones Industrial Average surged 6.8% on the week, completing its best three-week run since September 1982. The prior run came just after the inflection point in the 1981 to 1982 bear market.

JPMorgan Chase fell 1.70, or 5.8%, to 27.40. Dimon told CNBC television that March was a tougher trading environment than January and February, a sentiment echoed by other bank executives. Dimon warned that further deterioration of commercial real-estate and other assets was inevitable during this recession.

Shares of Citigroup fell 19 cents, or 6.8%, to 2.62; Goldman Sachs Group shed 3.91, or 3.5%, to 108.08, but still gained 11% on the week. Some banks had sounded bullish on their quarterly operations as recently as February, but investors have heard similar assurances reversed in earnings reports.

"Given the most recent history think, you've got a lot more banks that are guilty until proven innocent," said Alan Villalon, senior research analyst of First American Funds.

Share prices of many banks have doubled or trebled since their lows in early March, he said, and traders are waiting to see if there's a fundamental.

"Now, I think people are looking at it: OK here comes earnings."

Traders are also eagerly awaiting the results of the stress tests on major banks that are expected in April. Any sign of how the government is appraising the solvency of banks will give investors a lot more to go on, they say.

Villalon said he will scrutinize banking earnings reports and public statements for indications on the credit quality. The average percentage of "nonperforming" loans, where borrowers are not current, has risen more than fivefold since 2006, Villalon said. The big question for banks is whether that measure keeps rising, he said.

The Dow fell 148.38 points, or 1.87%, to 7776.18, completing its first three-week winning streak since May 2. The Dow is up 10% for the month and would have its best month since October 2002 if it held those gains.

The Nasdaq Composite fell 41.8 points, or 2.63%, to 1545.2 for a 6% gain on the week. The Nasdaq briefly turned positive for the year on Thursday. The broad Standard & Poor's 500 index fell 16.92, or 2.03%, to 815.94, and gained 6.2% on the week.

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